Compliance and law combine to stem corruption in Brazilian businesses

Whistleblowing against fraud and corruption is worse in certain countries, and perceived corruption varies from market to market. South American corruption problems have historically been among the most severe, and perceived corruption is high in Brazil, specifically. Even though it is more difficult to determine the actual levels of corruption overall, a study has determined that 70 percent of Brazilian executives interviewed believe that corruption is widespread in their country. Ernst & Young (EY) conducts a Global Fraud Survey that publishes those numbers among other conclusions that correspond with its work in fraud and dispute services. Among some of the interesting figures from the 13th EY Global Fraud Survey found are that fraud incidence rates have doubled in the United States over the past two years from 16 percent up from 8 percent and that China, Japan, and Russia have experienced significant increases in fraud incidence reporting.

José Compagño, EY’s Brazil Leader for Fraud Investigation and Dispute Services (FIDS) says that anti-corruption laws are helping to stem the increasing tides of corruption, and Brazil’s recent legislation is an important factor. The Clean Companies Act — as it is dubbed — imposes obligations on foreign and domestic companies operating in Brazil to stem bribery and corruption issues.

“As anti-corruption legislation continues to be enforced, it is likely that corruption will decrease in the years to come. In Brazil, one of the main factors contributing to a decline in fraud is the new anti-corruption law which was implemented on January 29, 2014. This law, which affects all Brazilian companies, will be an incentive for businesses to develop compliance programs and leverage FIDS solution on a recurring basis,” says Compagño.

Ernst & Young Brazil just acquired Conformity, a Brazil-based consulting firm that provides a technology platform to enhance ethics management and compliance reporting. U.S. clients with operations in South America can also take advantage of EY Brazil’s latest acquisition, which will strengthen EY’s FIDS offerings. Conformity provides reporting on ethics management and overall compliance through data visualization tools.

Compagño notes that Brazil ranks 77 out of 177 countries in Transparency International’s Corruption Perception Index, and is among the top 10 countries with the most perceived corruption. But perceived corruption does not have to be entirely a bad thing. Compagño adds: “Executives believing that corruption is widespread in Brazil may end up benefiting companies. There is an emerging trend among Brazilian businesses to utilize technologies to prevent fraud and corruption and handle corruption incidences with increased professionalism.”

While it is obvious that fraud and corruption can irrevocably damage a company’s outside reputation, its brand, and its staff structure, certain businesses are more susceptible to corruption than others. Compagño says that companies that have “significant commercials relationships” with the government, or otherwise interact with government in the way of license requirements or imports and exports are more exposed to the risk of fraud.

Compliance is therefore a vital component of staying corruption-free — something EY Brazil’s latest acquisition will target. Compliance programs along with Brazil’s anti-corruption law can collectively contribute to a future decline in overall business fraud.